Managing Your Money: Options for Same-Sex Couples

Congratulations! You’ve met the man or woman of your dreams and have moved in together or are planning the big move. You’re probably in the “ain’t love grand” stage, and we’d prefer not to burst your bubble. But how about a dose of realism, especially about money?

When you live with someone, you and your partner must make decisions about pooling money and property, or keeping your money and property separate. Because you live with someone doesn’t mean your financial lives must become one.

Don’t feel pressured to combine everything just because the couple upstairs has only one bank account. Keeping your property and debts separate means you’ll have no financial obligation if your partner lives beyond his or her financial means. Your paycheck cannot be garnished and your property cannot be taken to satisfy your partner’s overdue bills.

Of course, don’t refuse to pool your money just because you’re best buddy and his boyfriend, both hell-bent on independence, maintain all separate accounts. But before you put both names on bank or credit accounts, be sure you really know and trust your partner, and be certain you understand what combining finances means.

Both you and your partner may be fully responsible for all activity that takes place with the account. You each may be 100% liable for bounced checks, overdrafts, charges over the limit and all the rest.

Here Are Some Models for How to Share (or Not Share) Your Income and Property.

Marriage model

All property you acquire is jointly owned, no matter who earns the money to pay for it or who actually acquires it. You put all bank and credit accounts in both names. If you split up, the property acquired during the relationship is divided equally.

Socialist model

You open joint accounts and pay the joint bills out of joint accounts to which you have contributed according to your incomes, such as three-fourths and one-fourth.

Business partnership model

You open joint accounts for limited purposes, such as paying household expenses or saving for a vacation. It helps to have a contract specifying the percentage ownership in all property jointly accumulated.

Splitsies model

You each agree to be responsible for your own support. Like college roommates, you pay separately for food, clothes, entertainment and everything else. You have no joint accounts. This arrangement can be taken to extremes or can be worked out in a fairly easy-going, common sense, “I-paid-for-breakfast, youpay-for-lunch” way.

Joint Bank Accounts

Joint bank accounts are sensible if you limit their purpose and keep adequate records. That said, many same-sex couples maintain joint bank accounts for years. But still, a joint account is a risk; each person may have the right to spend all the money, unless you require both signatures on checks and withdrawals — and that can be cumbersome.

Joint Credit Accounts

Joint credit card accounts are even riskier than joint bank accounts. If your partner goes nuts, the most damage he or she may be able to do with a joint bank account is for the amount you have deposited or up to your overdraft protection. With a joint credit card, he or she may be able to charge to the credit limit and damage your credit rating. Still, many same-sex couples maintain joint credit card accounts.

To put two names on a credit card, fill out a joint application. Many companies have changed the blanks formerly labeled “spouse” to “co-applicant” or “co-applicant/spouse.” If the form still says “spouse,” cross off “spouse” and write “co-applicant.” You may not want to present yourselves as spouses if you are unmarried. Those terms have specific legal meanings.

As long as one of you has sufficient income or savings to be considered a good credit risk, you’ll probably get the card. Creditors often open joint credit accounts—and why shouldn’t they?

A joint account means more than one person is responsible for a debt. If Roger and James have a joint credit card, and Roger lets his sister charge $2,500 on it, James — as well as Roger — are each probably liable for 100% of the bill. If James retaliates by going on a buying binge, Roger — as well as James — is most likely responsible for all of James’ charges.

If you break up, close all joint accounts! All too often, one person feels depressed during the break-up and tries to pamper himself or herself with “retail therapy.” Don’t just allot the accounts so that each of you keeps some. You both still may be liable for all accounts, and you could get stuck paying your ex’s “therapy” bill. Close the accounts to further charges and do your best to work with your ex to pay off any existing balances. Your creditors generally will not remove your name from a joint account unless the account has a zero balance.

Credit Discrimination

Discrimination against Lesbians and Gays in credit is uncommon. Ability to pay seems to be the criterion used — not sexual orientation. If you believe you were discriminated against when requesting credit, there is little you can do unless your state or local municipality has a law barring sexual orientation discrimination in credit. A federal law bars creditors from discriminating on account of race, color, religion, national origin, sex, marital status or age, or because all or part of a person’s income derives from public assistance. Interpretations of this law have often declined to extend coverage to include sexual orientation.

Buying and Investing Together

It’s not difficult to make any joint purchase or investment. Salespeople are used to seeing all combinations of people buying and investing together. In major urban areas, you may be able to find gay or lesbian investment brokers, car brokers, loan brokers, etc.

If you make a joint purchase or investment, prepare an agreement reflecting your joint ownership or investment percentages. Even if only one of you takes out a loan to finance the purchase or uses separate money to invest or buy, you both may become owners, if that’s what you want.

If your purchase or investment comes with an ownership document, such as a car title slip or stock certificate, complete the document thoroughly. The purpose of a title document is to show the type of ownership you have.

Usually, there are three possible ways to jointly own and register property with title certificates. (Be sure to check with the local agencies for details.)

“Or,” as in “Maria Parker or Jane Axelrod.” If one owner dies, ownership and registration may be transferred to the survivor without going through a court probate proceeding. The “or” form, however, normally permits either owner to sell the car without the permission, or even knowledge, of the other. Also, in many states, the “or” form by itself does not clearly determine whether or not the survivor legally receives the deceased’s half.

“And,” as in “Lance Walters and Martin Kwan.” If one owner dies, his or her one-half usually passes by a will or living trust, or if he or she didn’t prepare anything, to the “next of kin” (children, parents or siblings). For your partner to inherit, you must have a will or living trust so stating. The “and” form usually requires both owners’ signatures to sell or give away the property.

“Joint tenants,” as in “Chris Ramirez and Randy Inko as joint tenants” (or JTWROS or “joint tenants with right of survivorship”). If one person dies, ownership passes automatically to the survivor. In many states, creditors won’t let the buyers put title in joint tenancy until the loan for the purchase is completely paid off. Joint tenancy usually requires both signatures to sell or give the entire property away.

Filing Joint Income Tax Returns

Generally, only legally married couples who are married on December 31 of the tax year can file joint income tax returns. Until the day arrives that same-sex couples win the right to legally marry across the U.S., gay and lesbian couples usually can’t file joint tax returns.

If one partner supports the other, however, the supporter sometimes can file a tax return as a single person and claim the other as a dependent. This is possible if you meet the five following tests:

Unmarried person. If the supported person is married and files a joint tax return with his spouse (this will be unusual in your situation), the supporting partner in this relationship may not be able to claim him or her as a dependent. There’s one exception: if the married couple did not earn enough to have to file a tax return, and did so only to get a refund, the supporting partner can often claim the dependent.

Citizen or resident. The supported person usually must be a U.S. citizen, resident alien or citizen of Canada or Mexico.